Is progressive taxation is back on the agenda?

The Compass group has welcomed the Pre-Budget Report with as much optimism as the Chancellor’s asessment of the depth of the recession:

Neal Lawson chair of Compass said: “Today’s Pre-Budget Report marks a move away from the Neo-Liberal/free market economic consensus pursued by both Labour and Conservative governments of the past 30 years – but this should not just be a blip before normal service, in the shape of speculative consumer capitalism, is resumed – the government needs to make this a turning point that leads to the moral transformation of our society”.

Jon Cruddas MP said: “This is exactly the kind of measure that we’ve been advocating for a while now and it’s good news for people like my constituents in Dagenham. This should be the first stage in re-balancing the tax system so it’s fairer for middle and low income earners, as well as kick-starting the economy in the short term. When the new US administration takes office then we have the chance to move in to another phase – an international crackdown on corporate tax evasion. Meanwhile, Cameron is now retreating from New Conservatism into orthodox Thatcherite economics and we have to expose that.”

Gavin Hayes General Secretary of Compass said: “A financial crisis that was in part caused by the excesses and risky behaviour of those at the top should not be allowed to unnecessarily hurt the rest of us, so today’s announcement on reducing VAT, whilst at the same time announcing plans to increase the tax burden on the super-rich should both be welcomed, it is absolutely right for government to limit the impact of the recession by using pragmatic and sensible measures such as these.”

As Richard Murphy points out, cutting VAT by such a small amount isn’t likely to impact upon retail prices for consumers:

On an item costing £4.99 the VAT saving will be under 11p. Can you see anyone shifting that price to £4.89?

On £500 (VAT inclusive price) the saving is £10.60. That’s neither here or there: if you are going to spend £500 then £10.60 or so will not change the decision. Other influences are much stronger.

So at low price points this is a boost for the retailer who will take much of the gain. I really do not expect them to pass this on. At high price points I doubt the impact.

Either way the saving goes to marginal jobs in the UK, and Woolworths won’t be saved by this, whilst cheap imports are the only likely sector to see a boost. The business to business sector will see none at all: VAT does not impact them.

But it’s more than that: this might fuel deflation, which we can ill afford. So it’s a mistake.

VAT is regressive, but not as badly as some taxes (e.g. council tax) so the poorest who need help will not benefit most.

John McDonnell MP, chair of the Left Economics Advisory Panel said of the tax changes:

“The introduction of a higher rate of tax for high earners is long overdue but the Government’s proposals are hardly a revolution, and delaying them until after the next election is pointless. The higher rate should be the start of creating a fair tax reform agenda, redistributing wealth from the super rich in order to take the low paid out of taxation altogether.

“The Government should also move immediately to tackle the large scale tax avoidance by the corporate sector, introducing legislation to outlaw tax havens, mirroring the Obama bill in Congress. The public revulsion over City bonuses and bank executive salaries has opened the way for radical tax reform. Government must seize the moment.”

The Public and Commercial Services Union warns of the impact of so-called “efficiency savings” and points out that billions of pounds in taxes go uncollected:

Commenting, Mark Serwotka, PCS general secretary, said: “Further efficiency savings of £5 billion should not be a prelude to yet more job cuts, office closures and privatisation.

“Key public services, such as justice, welfare and tax are already struggling to cope against a backdrop of massive job cuts and office closures.

“Whilst the promise of additional funds for jobcentres is welcome, the government needs to reverse its job cuts programme across civil and public services to safeguard their delivery.

“Whilst the promise of additional funds for jobcentres is welcome, the government needs to reverse its job cuts programme across civil and public services to safeguard their delivery.

“For example the government should be looking at tackling the £21.5 billion worth of uncollected tax and £25 billion lost through tax evasion, by putting more resources into HMRC to claw back the billions in lost revenue, which could be ploughed into public services and stimulate the economy.”

The Morning Star‘s editorial is critical of the direction of travel signalled by the Pre-Budget Report, not so much a return to Real Labour but a continuation of Blue Labour:

Out of his own mouth
(Monday 24 November 2008)

CHANCELLOR Alistair Darling condemned himself out of his own mouth when he said that the central objective of his unambitious pre-budget report was to support firms and businesses going through difficult times.

That is why he opted for a cut of two-and-a-half percentage points on VAT, which will be absorbed into business income rather than find its way into lower prices.

Working people, especially those wondering how long they will be in a job, are unlikely to run out on a spending spree on the basis of a VAT cut.

And, if Mr Darling really wished to spark economic activity, he should have helped those on the lowest incomes whose extra cash would certainly have increased demand.

Those robbed when Gordon Brown abolished the 10 per cent tax rate should be compensated by being lifted out of income tax liability entirely.

State pensioners, whose living standards have been eroded every year since the Tories abolished the link with wages, those working for a totally inadequate minimum wage and others forced to exist on the jobseeker’s allowance pittance should receive a boost in their income.

It is pathetic that the Chancellor should be posing the possibility of no more than a 5 per cent increase to 45 per cent for tax on annual incomes over £150,000 and then only on condition that Labour wins the next general election.

This proposal will not bring any additional income to the Treasury in the life of this government. It’s not even of sufficient scale to encourage the electorate to vote Labour in the hope that it will switch the burden of taxation from working people to the rich.

Government failure to tackle the spiriting away of potential tax revenues of at least £25 billion a year through overseas tax avoidance centres, mainly in British crown territories, emphasises once more its priorities.

The bulk of taxation should fall on the shoulders of those able to pay rather than those too poor to afford avoidance schemes.

And the government should also lift the cap on National Insurance contributions, which is a hidden tax benefit for the better-paid, and introduce a wealth tax.

But the government must not restrict itself simply to measures calculated to increase demand.

It has a responsibility to intervene actively in the economy, especially since the banks have been quick to accept cheaper Bank of England lending and government investment but have not passed benefits on to small businesses seeking to weather the recession.

The government must put substance behind its much-vaunted commitments to environmental issues and to higher employment levels.

Financing at least 100,000 new council homes a year and a nationwide programme of renovating and insulating existing local authority properties could begin to tackle the housing crisis, improve energy efficiency and cut fuel bills.

Similarly, a crash programme of expanding the railways would not only improve the transportation network but increase demand for steel, concrete etc, safeguarding jobs in these industries as well as construction.

Unless the government adopts an economic programme with social justice at its heart, its cosmetic measures will simply prop up big business and ensure that costs of the recession will be paid for by workers.

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Dutch courage? Anti-capitalism and mass migration

Blogging comrade Neil Clark has an interesting article in The First Post on the success of the Socialist Party of the Netherlands, which opposes mass migration on anti-capitalist grounds:

Anyone who argues that, as a political force, socialism is dead, ought to visit the Netherlands. The Socialist Party of the Netherlands (SP) is the fastest growing political group in the country.

They won 25 seats in the last general election – an increase of 16 seats – and made huge gains in last year’s local elections. They are now the third largest party in Holland in terms of members and could well replace the Dutch Labour Party as the main alternative to the Christian Democrats.

Why are they so successful? I would suggest that it is because they are a socialist party that actually has socialist policies. They oppose the privatisation of public services, advocate higher taxes on the very wealthy and have condemned the “the culture of greed” caused by “a capitalism based on inflated bonuses and easy money”. They oppose war and Nato and the nascent European superstate. They were the only left-wing Dutch party in Parliament to oppose the new EU Constitution in the 2005 referendum.

Of course the fact that they have one of the most charismatic – and photogenic – of all of European political leaders in the 41-year-old epidemiologist Agnes Kant (pictured above) does them no harm.

Part of its popularity with the voters lies in one particular policy which differentiates it from British or other European parties of the left: they oppose large scale immigration. The SP see the ‘free movement of labour’ as part of the neoliberal globalist package – something which benefits big business but not ordinary people. Their opposition to immigration is not based on racism – as tends to be the case with the BNP and other far-right parties in Europe – but on their socialist ideology.

A recent publication by the SP asserted that labour migration in the EU was making “more acute the contrasts between rich and poor and competition between different groups of workers within the EU”. Instead of lauding the free movement of labour as other parties on the left do, the SP calls for policies “to make migration unnecessary” and for the EU funds to be used to enable poorer regions of the continent to be self-supporting.

The SP’s opposition to large-scale immigration is not a recent development. In the 1980s, the party’s booklet Gastarbeid en Kapitaal (Migrant Labour and Capital), denounced the migration of foreign workers into the Netherlands as a capitalist ploy to drive down wages and destroy working class solidarity.

This is a far cry from the traditional position of the British left – which despite overwhelming evidence that large-scale immigration does reduce wages – still clings to an the ideology of open borders. In doing so, they are not only complying with the wishes of big business, who for obvious reasons welcome the influx of large numbers of people from low-wage economies onto their labour market; they are also espousing a policy which is unpopular with large swathes of the electorate and which is likely to become even more unpopular as unemployment grows.

The success of the Socialist Party of the Netherlands shows that there are lots of votes to be won by an unequivocally left-wing party which has the courage and sense to oppose large-scale immigration on non-racist, anti-capitalist grounds.